How to Make Money With Owner Financing
Sellers finding it difficult selling their homes in today's market can look at a creative way to market their homes. Owner financing can be a resourceful way to sell real estate while earning a steady cash flow. By offering a competitive interest rate, flexible terms and shorter qualification time, the number of potential buyers will increase dramatically.
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Instructions
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Choose an interest rate. Run a credit check on potential buyers to see their credit worthiness. If a potential buyer's credit shows that he is a slow payer, raise the rate to compensate for the risk. Set the mortgage note term no longer than five years with an option to extend it. Amortize the loan for 30 years to keep the monthly payments low enough for a buyer to afford.
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Decide on a minimum down payment. The buyer must have an initial investment in the property. If a buyer has less than perfect credit, offer to lower the rate in exchange for raising the down payment amount. This is one way a seller can protect her equity in the property in the event that the buyer defaults.
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Have the buyer make monthly escrow payments for taxes and insurance in addition to his mortgage payment. This will ensure that a homeowner's insurance and real estate taxes are paid on time. Another option is to have the buyer pay up one year of homeowners insurance and three months of property taxes. This can be placed in escrow with a title company.
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Hire an attorney or title company handle the closing. The title company or attorney will set up the escrow account and provide all the necessary closing documents, such as the mortgage note, required to close on the home. To protect your interest in the property, the attorney or title company will also record the mortgage note in the county courthouse where the property is located.
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